June 24, 2017

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Ryan Ong

Ryan Ong
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by Ryan Ong

BUDGET 2017 doesn’t have much of a theme, beyond upgrade yourself really quick. There’s a huge sense of urgency in this budget, and it’s not hard to see why. The events of 2016, which range from Brexit to the election of Donald Trump to China’s growing assertiveness, won’t be good for us. And the only way forward is, ironically, to look backward:

 

New budget, old strategy

Budget 2017 is out, and it’s all about forward progress in the industry. But in another sense, it’s also about looking backward, and returning to the root of what made Singapore successful in the first place.

When Singapore (unwillingly) gained its independence in 1965, the situation it faced was quite similiar to today. There was tension in South East Asia, and a sense that the future was a total unknown. In order to run our economy, we focused on producing a highly skilled and educated workforce. Singapore powered through its first decades on the back of that principle: That the Singaporean worker was more productive, more driven, and worth a higher salary than neighbouring counterparts.

But over the last decade, we’ve begun to lose steam. Not too long ago in 2015, for example, Minister for Trade and Industry Lim Hng Kiang pointed out that some industries had to restructure quickly, as productivity goals were not being hit.

Budget 2017 seems to be going back to an old formula. In the face of growing uncertainty, all we can do is rely on the Singaporean worker being better. Better skilled, better adapted, and hopefully better paid for it. That’s not an easy thing to ask, because our success in the mid-60s can be attributed to us being South East Asia’s (arguably) best workforce at the time. But our neighbours have had a lot of time to catch up since then.

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Here are the three harsh things that the budget implies:

 

1. Get with the programme or get left behind

Over $80 million will be spent on helping on Small to Medium Enterprises (SMEs) go digital, under the Go Digital Programme.

About $100 million is for the Global Innovation Alliance and Leadership Development Initiative, which basically encourages Singaporeans to go abroad and work.

Some $26 million will go to the Lifelong Learning Endowment Fund and Skills Development Fund, to train workers in skills relevant to fast growing industries.

A recent comment I read on Facebook asked: Does this mean we want a painter to become a programmer? The answer is yes. Budget 2017 is part of a life raft the government is building for workers.

Remember that retrenchments were at a seven year high, within the first nine months of 2016. Many workers, whom we assumed to be highly trained, were precisely the ones who found themselves out of a job. When you have large layoffs despite a (in terms of paper qualifications) highly skilled workforce, that means workers lack relevant skills.

That’s due to the rising number of disruptive business models (e.g. Uber and its effects on the transport industry), which have forced companies to value different skill sets. It’s bad news for Singaporean workers in their 30s and 40s, who may find their qualifications – which they paid good money to learn – become useless.

Now consider the urgency with which the G is driving at this:

Budget 2017 allocates $1.4 billion to upgrading jobs and the economy. Prior to that, Budget 2016 and Budget 2015 saw the development of the SkillsFuture programme, and emphasised support for robotics and digital technologies. It’s pretty clear what the G’s rescue plan is:

They want Singaporeans to be the innovative ones who are doing the disrupting, not the ones losing jobs from the industries that are disrupted.  Singaporeans who refuse to take big risks, and won’t step out of their comfort zone to learn new skills, are shark bait. The G isn’t taking steps to protect dying industries, or playing at protectionist moves.

 

2. Businesses might pass on the water costs

Pass it on to you, the buyer, that is. The price of water is increasing by 30 per cent, starting in July 2017. It’s estimated that this will come to less less than $25 a month, for 75 per cent of businesses; although I’d contend we don’t know how many businesses there are, and 25 per cent of all businesses in the country is still a huge number of businesses.

It wouldn’t be unreasonable to guess that certain businesses – such as laundromats or restaurants – will be hit much harder by rising water costs than others. Now the purpose of the hike is to “raise awareness” of the importance of water, because without the government doing that none of us would know we’d die without it. But businesses tend to react to price hikes in two ways:

One, the G could have “raised awareness” of the importance of water, and businesses take steps to cut back. Or two, businesses could just factor the costs into their pricing. So we may see more places charging for water, higher prices at laundromats and car washes, higher costs on canned drinks, and so forth.

Now I’m not totally against the government’s intentions, by the way. I’m sure they just want us to waste less water, because over-consumption is the result of cheap supply. But it would be just as easy to set a water cap, and then impose a fine on over-consumption. And have some way to notify the household via text message when they’re nearing the water use limit.

Why punish those who have been conscientious about water use?

 

3. Carbon taxes can mean higher costs to consumers

I like to think most of you aren’t reading this from your ivory-backed chairs, while eating fried Pangolin and resting your rhinoceros-horn water on a coaster made from an endangered tortoise. Like most of you, I’m entirely for carbon taxes.

I’ll even say it’s an admirable and gutsy move: after the Trump election, I expected our pragmatic government to pivot in the other direction, and abandon environmentalism. We have financial inclination to do so, since Singapore has deep penetration into the oil and gas sector.

Nonetheless, from 2019 carbon emitters will be charged $10 to $20 per tonne of greenhouse gas. As with the water situation, businesses can go either way. Some might try to cut down on emissions, but some will try to pass on the costs to consumers. Knowing what big corporations are like, we’d better get realistic and plan to spend more.

On a related note, diesel will be taxed at 10 cents per litre. Cars pay $100 less annual diesel tax, and taxis pay $850 less. Diesel is more environmentally friendly than gasoline, so hopefully transport businesses will consider moving in this direction, rather than raising prices.

 

Budget 2017, along with the last two budgets, seem to be a polite way to remind us the clock is ticking.

Last year may have been the tipping point, in the way the global economy has changed. Stragglers who can’t adapt to the new economy are trying to fight back, by electing governments that impose protectionist measures.

But Singapore hasn’t got the luxury of doing that – we’re too small, and too vulnerable, to play the isolationist game. It’s clear we’re not catering to those who can’t adapt; that’s what all these expensive incentives are about. The clock is ticking, especially for those who refuse to re-skill and upgrade.

 

Read the first part, Economic Realities: 3 harsh takeaways from the Committee on the Future Economy, here.

 

Featured image by Pixabay user jarmoluk. (CC0 1.0)

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by Ryan Ong

WHY do venture capitalists (VCs) need such big offices? It’s a common question, but if you know any, the answer is obvious. It takes about 1,500 square feet, minimum, to house the ego of one VC.

But VCs have some right to that kind of arrogance. They’re the ones who drive innovation, at huge risks to themselves. They’re the cowboys of the financial world, who take extreme risks to advance society. And now, we’re likely to see more people participating in venture capital, with the Monetary Authority of Singapore (MAS) simplifying the rules:

by Ryan Ong

SENTOSA Cove is becoming a ghost town, with vacancies estimated at 9.6 per cent in the fourth quarter of 2016. On top of that, more than half of Sentosa Cove’s property sales last year (15 out of 21) were losses. Not the kind of $10,000 loss that a retiree complains about at the coffee shop either; at The Turquoise, one of the more prominent Sentosa Cove projects, a unit that was bought for $7.16 million was resold at $3.8 million.

Now in 2015, when Sentosa Cove properties fell 36 per cent from their last peak (2011), it was thought that prices there were “bottoming out”. But if anything, the downward trend seems to be accelerating. Here’s why Sentosa Cove may be locked in a policy-created tailspin:

by Ryan Ong

PRESIDENT Donald Trump disappointed the markets last week, when his news brief failed to touch on expected stimulus measures. Last year, Japanese Prime Minister Shinzo Abe announced a USD$73 billion (SGD$103.7 billion) stimulus measure, in the vain hope he might actually convince a Japanese person to spend a yen someday. And with Singapore’s upcoming Budget 2017, business owners are probably hoping for policies that provide a stimulus. But what exactly is a stimulus?

by Ryan Ong

There may be too many property listing sites for Singapore

WITH the addition of two new online services last year (Ohmyhome and Yotcha), the online property market has gotten crowded. Along with PropertyGuru, 99.co and StreetSine, all of them are now locked in a constant fight for your attention. And they all provide the same basic service, which is comparison.

All of this is supposed to be good for “the market”. Property agents, buyers and sellers are supposed to have it easier than ever. Listing sites are much cheaper than traditional marketing methods, such as classified ads – 99.co charges just $588 per year for 100 listings, while PropertyGuru (which is the granddaddy of property sites in Singapore) charges $2,240 per year.

Contrast this with traditional print advertisements, which can end up costing those same amounts for just a single ad.  And of course, buyers now have the luxury of looking for property on their phone, on the bus or at home.

In some respects, these sites have succeeded in changing Singapore’s property market. Some of the changes that have been caused by these sites are:

  • Buyers are quicker at spotting abnormal prices
  • The property business is becoming more entwined with the online media business
  • Buyers are somewhat better informed

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1. Buyers are quicker at spotting abnormal prices

Most property portals, such as 99.co or StreetSine, don’t just list the price of a specific property. They also show the prices of other properties in the same vicinity, which lets buyers work out the average (or median for the more mathematically inclined) price per square foot. For example, look at this screenshot:

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You can see almost immediately if a unit is exceptionally expensive or cheap. Here’s another example, which also tracks prices in the general neighbourhood:

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In the past, buyers had to dig through records themselves to check transaction histories. Portal listings practically guarantee every buyer is less likely to get ripped off, even first-timers who may not know where to check the price history. (You can check the Urban Redevelopment Authority’s records here by the way.)

The ease of information impacts our property market in ways that go beyond the portal’s user numbers. Even casually browsing the site could influence buyers and sellers.

 

2. The property business is becoming more entwined with the online media business

One major difference to the property market is that now, sellers have to fight for online visibility. Fewer buyers will walk around a neighbourhood for two hours, shopping for potential sales. They find their prospects via price and location filters on a portal site.

This leads to property agents and developers now having to think like media companies, instead of just real estate experts. If someone types “condo-jurong-under $800,000” into a search bar, every site wants to be the first result they get. As such, an increasing number of developers and agents are now also learning to think in terms of Search Engine Optimisation (SEO) and content marketing. In Singapore’s property market, “e-commerce” will soon lose its meaning – e-commerce is commerce.

At present, developers and agents are basically paying portal sites (or even private bloggers) to get them visibility. But it’s just a matter of time before they learn to produce their own online content.

Which leads to the third thing…

 

3. Buyers are somewhat better informed

Property news used to be esoteric. Go back to the 1980s; issues like stamp duties and deferred payment schemes were random words that made no sense to buyers. Today, most buyers – even those who are buying their first home – have some familiarity with concepts like the Qualifying Certificate or Additional Buyer’s Stamp Duty.

They can’t help it. Portal sites fight tooth and nail for high visibility online and that results in a non-stop deluge of content. Google one project and you’ll find a few hundred pages breaking down the pros and cons, and speculating on potential gains. And in order to get ahead, portal sites also churn out information on how loans work, what agents do, what the Option to Purchase is, and so forth.

That’s all a sneaky way to get visibility. When you type “what is an Option to Purchase”, every portal site wants to be the first to answer your question.

This results in buyers who are somewhat better informed. I say “somewhat better” because, within the mass of content, buyers are also absorbing information that persuades them to buy.

 

What hasn’t and probably won’t change no matter how many portal sites we get?

Portal sites are also credited with big industry changes, despite evidence to the contrary. They are:

  • Decreased use of property agents
  • Major changes in property prices

 

1. Decreased use of property agents

This is the number one accusation hurled at listing sites, like Yotcha. But that’s putting the cart before the horse.

In 2010, only 11 per cent of HDB resale buyers and sellers handled transactions without an agent. By 2013, that number was up to around 25 per cent. HDB itself has concise guidelines for buyers and sellers wanting to do this. You’ll note that Yotcha (and the app Ohmyhome, which bypasses the need for property agents) came about in 2016.

In other words, services like Yotcha came about as a response to fewer people using property agents. They are not a “cause” of it.

The commission of a property agent in Singapore is around 2 per cent of the sale price for sellers. On a $350,000 flat, that’s a hefty $7,000. So it’s not surprising that most people will at least try to muddle through it first and then call in an agent as a last resort.

Of course, this isn’t to say that Yotcha won’t compound the problem – it is too new to tell. But in the words of Billy Joel, it didn’t start the fire.

 

2. Major changes in property prices

So price comparison drives prices down, right? That’s a supposed benefit of comparison platforms, but we should be careful not to exaggerate the impact.

Property prices move for a huge variety of reasons. Property prices in Singapore are going down because of cooling measures by the G, a weakening economic outlook, fewer rich expats due to the slump in oil and gas and finance, and many other possible factors. One of those many factors may be the increased use of portals and price comparisons. But we can’t know that for sure or guess to what degree it contributes to falling prices.

The flip side is also true. If there’s a huge hype for a particular area, prices will be inflated. And the comparison platforms will reflect and reinforce that. When you can see everyone hiking prices, you will too.

It’s more accurate to say that various portal sites reflect the market sentiment. Property portals probably won’t be the catalyst for major price changes, no matter how many of them we have.

 

Featured image House/Home Inspection by Flickr user Mark Moz. (CC BY 2.0) 

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by Ryan Ong

BACK when President Donald Trump said he was going to fight a trade war with China, the business community only took him half-seriously. Any Trump statement was assumed to be 80 per cent bovine excrement, 10 per cent badly distorted fact and 10 per cent Russian bribery. But now that he’s in power, Trump seems serious about helping America to commit suicide. So stock up on canned food, and start learning how to conduct DIY dental surgery. We don’t know whether America or China will win this fight, but we sure as hell know we’ll be the ones who lose:

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by Ryan Ong

EVERYTHING is a commodity these days. Facebook likes, views on your blog, forgiveness in a mega-church, and now even your insurance policy. For those of you who bought an endowment policy, and then regret it, there’s a way out. In case you haven’t heard it blaring over a radio advertisement yet, there are people out there who want to buy your policy:

by Ryan Ong

EVERYTHING is faster and more efficient in the age of digital banking, including going bankrupt. When you consider you can get four times your monthly income in cash, in 15 minutes, it’s pretty amazing we’re all not stress eating caviar while looking at our monthly bills. For those without self-control though, the Association of Banks in Singapore (ABS) has made a help package – in the form of a new debt consolidation programme:

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by Ryan Ong

HOUSES are valuable assets, right up till you realise you’re short on cash. After the tenth straight week of donating blood just for free Milo, that sea view unit will seem a lot less appealing. If only you could, oh, unpay some of the money you’ve put in the mortgage, or get some money out of your house without renting or selling right? Well, you could: